12 min read

How to make a financial plan for your family

You may want your cash to grow so you can buy a car, go on the family holiday of a lifetime, or simply save for a rainy day. But if you really want to make these dreams a reality, you first need to think about making a financial plan for your family.

Man coming up with a financial plan with his partner and two children behind him

Getting your family finances in order can be a daunting prospect, but by breaking down the process, setting yourself goals and being disciplined it doesn’t have to be. By making a financial plan you can get you and your family on the right path, whatever your goal is.

How to start making a financial plan

The best place to start is by looking at your family’s current spending. You can do this in many ways, depending on your personal preference.

You can use a spreadsheet, a budgeting app on your smartphone or go old fashioned and use a pen and paper to track your spending. Use these to work out your income and outgoings each month, covering everything from financial products and household bills. Divide your spending into compulsory and non-compulsory expenditures, and be strict with yourself. This way you can see if there are any obvious savings to make.

Very quickly you’ll identify how much you’re spending on unnecessary outgoings – cash that could otherwise be used to save or invest.

Where to identify unnecessary expenses

Unused gym memberships and magazine subscriptions are just two expenses that can often be cut without much pain. When you dive further into your finances you may be able to see if you’re spending more money on food than you would like, or if you could cut back on buying coffees during the working day.

Changing utility suppliers regularly is a good way of getting the best deals. When it comes to television and Internet suppliers, they often offer discounted introductory offers for the first 12 months, so by switching each year you can keep this cost low.

People are often surprised at how much their spending mounts up over the course of a month. Something as simple as making lunch at home rather than buying it every day could yield a great saving over a year.

But make sure you leave some room in your budget for discretionary spending. For instance, if you like the latest technology, make sure you put aside some cash for you to upgrade when the latest gadget comes out.

Similarly, you could have a monthly budget of £100 for entertainment and nights out. This may not feel like a lot for a family of four, say, but making use of family discounts and voucher sites can help save money while still going out.

Plan with financial goals in mind for your family

Next, you should think about your financial goals. Are you saving up for your wedding? Or are you putting cash aside for your children or grandchildren?

Work out your goals and this will give you something to aim for. For example, if you’re planning a big holiday in two years’ time, you can work out how much you should be putting aside each month so that you won’t be struggling to save closer to the time.

By planning in advance you can make small savings now which will add up over time. If you’re looking to invest in your child’s future, putting aside a smaller amount like £25 a month will add up quickly when you’re looking at a longer time period.

Working out a financial goal is also a great motivational tool and should make your more disciplined in your attempts to save. Set milestones along the way, perhaps when you reach £500, £1,000 and so on.

Don’t just save – instead, improve your situation

Before you start, it’s important to make sure you’re in the best position to save. If you’re in debt, cutting expenditure will allow you to pay more of your debt off each month. This will lower the interest you’re charged in future and will be better for you financially in the long run. Pay down existing debts first, as the interest charged on this tends to be much higher than you’d get from a high street savings account.

You should also make sure your current savings and investments are working as hard for you as they possibly can. If you have cash languishing in poor value savings accounts, take some time out and switch them to market leading accounts which will pay higher interest.

Also consider moving your savings into stocks and shares accounts, which often perform better in the long term. Keep in mind that you may want to hold some cash savings back, which is easier to access in case of an emergency.

Similarly, if you’re investing, make sure you’re using the right investment platform with the lowest fees for your levels of trading, and that you’re invested in the funds that best match your risk profile. When in doubt, seek the guidance of a professional financial adviser.

Involve the whole family in your financial planning

Perhaps the most important thing is to talk to your partner and others about your financial situation. Work out as a family what you think you could save money on, and how you would rather spend it. Remember – this affects them too, and including them in your family’s financial decision making can help everyone understand how they can help, and why. It could even be a great way to help get your kids into the saving habit.

By being open about your financial successes, worries and goals you can better understand what you are trying to achieve as a family and make sure you’re on the right path.

 

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.